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The Power of Integrality: Linkages between Product Architecture, Innovation, and Industry Structure

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  • Fixson, Sebastian K.
  • Park, Jin-Kyu

Abstract

A substantial literature stream suggests that many products are becoming more modular over time, and that this development is often associated with a change in industry structure towards higher degrees of specialization. These developments can have strong implications for an industry€ٳ competition as the history of the PC industry illustrates. To add to our understanding of the linkages between product architecture, innovation, and industry structure we study an unusual case in which a firm Â€Ó through decreasing its product modularity Â€Ó turned its formerly competitive industry into a near-monopoly. Using this case study we explore how existing theories on modularity explain the observed phenomenon, and show that most consider in their analysis technological change in rather long-term dimensions, and tend to focus on efficiencyrelated arguments to explain the resulting forces on competition. Expanding on these theories we add three critical aspects to the theory construct that connects technological change and industry dynamics. First, we suggest re-integating as a new design operator to explain product architecture genesis. Second, we argue that a finer-grained analysis of the product architecture shows the existence of multiple linkages between product architecture and industry structure, and that these different linkages help explain the observed intra-industry heterogeneity across firms. Third, we propose that the firm boundary choice can also be a pre-condition of the origin of architectural innovation, not only an outcome of efficiency considerations.

Suggested Citation

  • Fixson, Sebastian K. & Park, Jin-Kyu, 2007. "The Power of Integrality: Linkages between Product Architecture, Innovation, and Industry Structure," Working papers 37154, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  • Handle: RePEc:mit:sloanp:37154
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    File URL: http://hdl.handle.net/1721.1/37154
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    References listed on IDEAS

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    1. Langlois, Richard N., 2002. "Modularity in technology and organization," Journal of Economic Behavior & Organization, Elsevier, vol. 49(1), pages 19-37, September.
    2. Langlois, Richard N., 2004. "Chandler in a Larger Frame: Markets, Transaction Costs, and Organizational Form in History," Enterprise & Society, Cambridge University Press, vol. 5(03), pages 355-375, September.
    3. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    4. Richard N. Langlois, 2003. "The vanishing hand: the changing dynamics of industrial capitalism," Industrial and Corporate Change, Oxford University Press, vol. 12(2), pages 351-385, April.
    5. Fixson, Sebastian K., 2007. "Modularity and Commonality Research: Past Developments and Future Opportunities," Working papers 37145, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    6. Fixson, Sebastian K., 2007. "Modularity and Commonality Research: Past Developments and Future Opportunities," Working papers 37286, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. Cooper, Robin & Slagmulder, Regine, 2004. "Interorganizational cost management and relational context," Accounting, Organizations and Society, Elsevier, vol. 29(1), pages 1-26, January.
    8. Alan MacCormack & John Rusnak & Carliss Y. Baldwin, 2006. "Exploring the Structure of Complex Software Designs: An Empirical Study of Open Source and Proprietary Code," Management Science, INFORMS, vol. 52(7), pages 1015-1030, July.
    9. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    10. Richard N. Langlois, 2005. "The Secret Life of Mundane Transaction Costs," Working papers 2005-49, University of Connecticut, Department of Economics.
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    Cited by:

    1. Garud, Raghu & Munir, Kamal, 2008. "From transaction to transformation costs: The case of Polaroid's SX-70 camera," Research Policy, Elsevier, vol. 37(4), pages 690-705, May.

    More about this item

    Keywords

    Product Architecture; Integrality; Modularity; Technological Change; Intra-industry Heterogeneity; Industry Structure; Competition; Strategy;

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